Life’s lessons unlearned: Timing the stock market

Most red-blooded American boys grow up to be fine upstanding citizens thanks to three pieces of advice, usually from a mother, grandfather or some other respected adult. Those pieces of advice are:

Don’t sit on a hot stove! (Or for that matter, a cold one).

Don’t touch your tongue to a frozen pole.

Don’t stick beans up your nose.

And last, but definitely not least, don’t try to time the stock market. Warren Buffet, one of the richest and most successful investors in the world, says he can’t do it. John Bogle of Vanguard, and father of the index fund, says he can’t time the market and he doesn’t know anybody who can. And yet…

People who ought to know better keep doing it. Some probably don’t see their actions as timing the market. But it is. They think they are playing it safe by anticipating events, and then retreating to a “safe” harbor/investment until the problem they predicted solves itself and the market returns to normal or a growth spurt when it is “safe” to return. In the meantime, they have lost out on any gains that happened when the down market rises.

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During the mid-2000’s Great Recession, tens of thousands of federal thrift savings plan investors pulled their money out of the stock-indexed C, S and I funds — which were down having lost value —and went into the G-fund, where they earned practically nothing. Then during the great recovery they failed to buy into the C, S and I funds, which were, in effect, on sale for several years. Feds who rode out the GR and continued to buy the C and S funds in particular made out like bandits. They bought “low” when prices were down and reaped big rewards when the markets returned to, then surpassed, their previous highs. Their TSP balances roared back as new shares they had purchased at low prices soared. Lesson learned, right? Wrong.

When we got the news that the U.K. was going to pull out of the European Union — the media dubbed it Brexit — some people, again, panicked. People yanked $2.1 billion (with a “B”) from their stock-indexed C, S and I funds to keep them “safe.” What happened is that stocks shot up. When/if people decide to go back they will pay a lot more for shares. For more on that, click here.

The Trump Slump: When it became official that Donald J. Trump of New York would be our next president, many predicted a Trump Slump for the stock market. Again, W-R-O-N-G! The market has been climbing like Superman trying to rescue Lois Lane. It’s at record highs. Will it last forever? No. But — if the last 100 years mean anything — we know that the market goes up, then down, then up, and down again. But the long-range trend has been up. Like the proverbial guy walking up a slight hill playing with a yo-yo. Up and down, but eventually, mostly up.

Nearly Useless Factoid

By Michael O’Connell

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